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Questions and Answers
What is capital expenditure (CAPEX)?
What is capital expenditure (CAPEX)?
- Costs incurred in the hiring of employees for the organization
- Costs incurred in the day-to-day running of the organization
- Costs incurred in the procurement of assets for the organization (correct)
- Costs incurred in the marketing and advertising of the organization
What is the difference between CAPEX and OPEX?
What is the difference between CAPEX and OPEX?
- CAPEX are costs incurred in the day-to-day running of the organization, while OPEX are costs incurred in the procurement of assets for the organization
- There is no difference between CAPEX and OPEX
- CAPEX are usually low cost, while OPEX are usually high cost
- CAPEX are accounted for over several accounting periods, while OPEX are accounted for in the period in which they're incurred (correct)
What are some examples of CAPEX?
What are some examples of CAPEX?
- Rent and administration costs
- Selling and distribution costs
- Monthly bills and low-value procurements
- One-off purchase and machinery (correct)
What are some examples of OPEX?
What are some examples of OPEX?
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How does the procurement approach differ for CAPEX and OPEX?
How does the procurement approach differ for CAPEX and OPEX?
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Study Notes
Capital Expenditure (CAPEX)
- CAPEX refers to the funds used by a company to acquire, upgrade, or maintain physical assets such as property, buildings, equipment, and technology.
- CAPEX is a long-term investment in the company's infrastructure, expected to provide benefits over a period of time.
Operating Expenditure (OPEX)
- OPEX refers to the day-to-day expenses incurred by a company to operate and maintain its business.
- OPEX is a short-term cost, typically expensed in the current period.
Examples of CAPEX
- Purchasing new equipment or machinery
- Building a new factory or office
- Upgrading existing technology infrastructure
- Acquiring a new business or asset
Examples of OPEX
- Salaries and wages of employees
- Rent and utilities for offices and facilities
- Marketing and advertising expenses
- Travel and training expenses
Procurement Approach
- CAPEX typically involves a more formal and structured procurement approach, with a specific budget and approval process.
- OPEX, on the other hand, may involve a more flexible and ongoing procurement approach, with a focus on meeting immediate business needs.
- The procurement approach for CAPEX tends to be more strategic and long-term, while OPEX is often more tactical and short-term.
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